RICHMOND—Governor Bob McDonnell today completed his review of the major transportation funding compromise passed by the General Assembly in late February. The bill substantially meets the goals established by the governor when he called for transportation investment and reform to be a top priority during the 2013 General Assembly session. However, the governor has proposed amendments to ensure that the provisions of the legislation do not negatively impact Virginia businesses and citizens, that they comply with the Virginia Constitution, and that Virginia’s Executive Branch agencies can properly implement and administer the new and improved funding mechanisms.

The bill reflects the principles of the governor’s introduced bill, which, as amended, reduces the gas tax by 35 percent and replaces it with a sales tax that grows with the economy, uses $200 million in current general funds, uses another $200 million in future general funds from the federal Marketplace Fairness Act, and ensures that alternative fuel vehicles pay a share of the maintenance of the roads.

“Virginia is now faced with the need to invest in our transportation system to ensure that our highway, rail and public transportation infrastructure is safe, efficient and reliable for our more than 8 million citizens,” Governor McDonnell said. “I thank Republicans and Democrats in the House of Delegates and Virginia Senate for working together across party, philosophical and regional lines to solve one of our most vexing and longstanding legislative challenges. For 27 years Virginians have sat in traffic while partisan differences over how to address these challenges have stalled progress. The transportation funding and reform package that passed the General Assembly last month was an innovative solution that represents a realization that we must invest in our infrastructure to ensure our continued economic prosperity, safe roads for our citizens to travel, and an enhancement in their quality of life.

“In 1983, President Ronald Reagan proposed and signed legislation to more than double the national gasoline tax. When signing the bill, he said: ‘We simply cannot allow this magnificent [transportation] system to deteriorate beyond repair. The time has come to preserve what past Americans spent so much time and effort to create, and that means a nationwide conservation effort in the best sense of the word. America can't afford throwaway roads or disposable transit systems. The bridges and highways we fail to repair today will have to be rebuilt tomorrow at many times the cost.’

“Virginia’s economy depends upon a safe, reliable, efficient transportation system spanning all areas of the Commonwealth. This is why I have substantially agreed to the provisions in the compromise bill that passed our legislature, but have proposed multiple amendments to limit what it asks Virginians to contribute, to address potential legal questions regarding the regional taxing authority, and to clarify many administrative and technical aspects of the bill.”

Governor McDonnell’s key policy amendments include:

· Reducing the proposed vehicle titling tax increase from 4.3 percent to 4.15 percent. After hearing from automobile dealers and constituents, the governor proposed this amendment to ensure the increase is reduced and does not adversely impact the number of vehicles purchased.

· Reducing the Alternative Fuel Vehicles annual Fee from $100 to $64. The intent of this fee assessed to drivers of alternative fuel vehicles was to ensure that they are paying their share for the road maintenance and wear and tear caused by their vehicles. The original proposal for a $100 fee was based on a 17.5 cents per gallon gas tax. The conference report establishes a lower rate of taxation on gasoline. As such, this amendment ensures equity in how different types of vehicle fuels are taxed.

· Correcting and reducing the rate of taxation for the regional congestion relief fee. The stated goal for this fee was to raise approximately $30 million per year. Based on slightly incorrect data, the fee was set at $0.25/$100 for real estate transactions. Utilizing correct data, a rate of $0.15/$100 will generate the same revenue of $30 million per year.

· Reducing the Transient Occupancy Tax in Northern Virginia. At 3 percent, the TOT would place the tax in Northern Virginia near or above surrounding out-of-state jurisdictions. Reducing the rate to 2 percent will not significantly impact revenues, but will ensure Virginia’s hotels remain competitive.

· Addressing potential legal questions regarding regional taxation authority for Northern Virginia and Hampton Roads. Amendments are made to the sections imposing the regional taxes for transportation by the state to improve the legal posture of the law by changing the applicability of the taxes to any Planning District Commission meeting certain empirical thresholds including population, registered vehicles and transit ridership. Hampton Roads and Northern Virginia are the only jurisdictions currently meeting these criteria, but in the future other parts of the Commonwealth could utilize these tools if their transportation challenges continue to grow.

· Ensuring transportation funds generated by this legislation are only used for transportation. General provisions were added to the legislation to ensure that funds provided for in the statewide funding and regional plans remain dedicated to transportation in the years ahead. In making this commitment to fund this core function of state government, Virginians expect that commitment to be honored and that this funding is to be used solely for the purpose for which it was intended.

These amendments, combined with a series of technical and administrative amendments, will accomplish the goals established by the governor earlier this year by moving away from the declining gasoline tax and toward a more dynamic sales tax-based revenue source. The final version of HB2313 sponsored by speaker Bill Howell eliminates the 17.5 cent per gallon tax on gasoline, increases the state sales portion of the sales tax from 5 percent to 5.3 percent, dedicates revenues for the Commonwealth Mass Transit Fund and the Intercity Rail Operating and Capital Fund, and dedicates increased revenues for the Commonwealth Transportation Fund. Governor McDonnell’s amendments would still result in over $5.9 billion in total revenue for transportation over the next five years.

This long-term transportation plan will generate thousands of jobs, create hundreds of millions of dollars in economic activity and provide the Commonwealth with the transportation infrastructure necessary to grow and prosper in the decades ahead. As a result of this plan, thousands of delayed construction and maintenance projects around the state will be funded, from widening I-64 between Newport News and Williamsburg, widening Route 28 in Northern Virginia, bringing down tolls on the Dulles Toll Road and advancing the Silver Line, bringing Amtrak service to Roanoke, and helping to build the Coalfields Expressway in Southwest Virginia. It will also eliminate the current unsustainable practice of taking money meant for new projects just to fund paving and pothole patching (currently equaling nearly $400 million annually).

“If we do not act now to solve the Commonwealth’s transportation funding problem, the cost of delay will be much higher in the future” Governor McDonnell said. “I thank Speaker of the House Bill Howell for his leadership and many other persistent legislators to get this bill passed to ensure Virginian’s economic prosperity, and to provide safe roads for our citizens and the quality of life they deserve. I also thank Attorney General Cuccinelli for the assistance he and his Office provided to my Office throughout the process to highlight and address the legal questions raised.”